What are the features of new economic policy 1991?

Answer 1

1. Liberalisation:

The fundamental feature of the new economic policy is that it provides freedom to the entrepreneurs to establish any industry/trade/ business venture.The area of liberalization is (i) licensing business, (it) Foreign Investment (iii) Foreign Technology (iv) Estab­lishment, Merger, Amalgamation and taken over, and (v) Simple Exit policies.

Privatization:

(i) Number of industries reserved for public sector has been reduced from 17 to 6. Private sector can now set up its units in the field of iron and steel, energy, air transport, etc.

(ii) Till the end of 6th Plan, share of public sector in total investment continued to be greater than that of the private sector. It is intended to be reduced to 45% in the 8th Plan. Thus 8th Plan aims at raising the share of private sector investment to 55% of the total.

(iii) Shares of public enterprises are to be increasingly sold to the workers and general public, with a view to increasing the participation of private individuals.

(iv) A large part of industrial investment of the private sector to be financed by; National Industrial Finance Institutions. These institutions, while sanctioning loans for the new projects, used to exercise their right of 'Conversion' invariably. It implied the right of converting the loans into share capital by the Financial Institutions.

Thus, the private firms were always under the constant threat of conversion. According to the New Industrial Policy, the Financial Institutions will not insist on the conversion clause. With the expansion of privatization there is every possibility of increase in productivity and efficiency.

3. Globalization of Economy:

In short, globalization means

(a) Reduction of trade barriers with a view to allowing free flow of goods to and from the country.

(b) Free flow of foreign capital in terms of investment i.e., direct and portfolio for ensuring conducive atmosphere.

(c) Free flow of technology, and

(d) Free movement of labour and manpower.

5. Modernization:

New economic Policy accorded high priority to modern techniques. It aims at to augment the growth rate of sunrise industries. In order to import technical dynamics to Indian industry, the Govt, decided to clear all foreign collaborations. Private entrepreneurs will be free to settle the terms of such collaborations on their own behalf.

Moreover, Govt has also been trying to stimulate private entrepreneurs to establish their own research and development centers by offering them various tax concessions. Efforts are also being made to revive and modernize the sick industrial units both within the public and private sectors.

6. New Public Sector Policy:

Public sector attracted priority. In the words of Dr. Manmohan Singh, Finance Minister in Congress Govt. that this priority was given to the public enterprises in the hope that it will help to accumulate capital, industrialization, economic growth and removal of poverty.

But none of these objectives were achieved. Thus, new economic reforms are trying to shift the emphasis from public to the private sector.